What Can We Do About Unemployment Benefits?

My report on the Senate's failure to pass the latest version of the jobs/tax bill has generated more comments than I've seen in a long while. They concern one piece of the package — the extension of unemployment insurance benefits.

I hear a lot of justifiable anger and anxiety. Also an urgent need to do something to get the folks in power to do what they ought to do. But what?

Let me try to answer some of the big questions that have been asked.

Could the President end-run Congress by issuing an executive order extending UI benefits?

Unfortunately, no. As Open Congress blogger Donny Shaw explains, executive orders are invalid under the Constitution if they go beyond the scope of laws that Congress has passed. Since Congress has thus far refused to pass a law extending UI benefits, the President's hands are legally tied.

There's a second, related reason the President couldn't take care of the problem with an executive order. Extending UI benefits will involve an expenditure of federal funds. The Executive Branch can only spend funds that Congress has appropriated — and only for the purposes Congress designated.

Shouldn't the Democrats cave in and offset the costs of extending UI benefits by reducing other spending?

The issues here are complex. And, as a lobbyist friend of mine says, what you see depends on where you stand.

Most, though not all, Democrats in Congress contend that the UI benefits extension should be treated as emergency legislation, i.e., not subject to the regular PAYGO (short for pay-as-you-go) rules. As history shows, Congress has repeatedly passed emergency legislation extending UI benefits during economic downturns. So there's nothing unusual about what the Democratic majority wants to do.

The Republicans say they've got no problem with extending UI benefits, but the benefits have to be paid for because otherwise they'll increase the deficit. It's hard to know how sincere this concern is. My own view is, in most cases, not very.

After all, the Republicans objected to parts of the jobs/tax bill that would have raised more revenues by closing some egregious tax loopholes. Moreover, figures reported in Los Angeles Times show that all but a fraction of the UI benefits could have been paid for by letting the business tax breaks in the bill expire. Did we hear any Republicans suggest that as a pay-for?

So it looks as if the Republicans are trying to score a political point — specifically, that they're concerned about the deficit and Democrats aren't. Or perhaps, as Washington Post blogger Ezra Klein has suggested, they hope voters will blame the Democrats for persistently the high unemployment rate and the pain it's causing.

This may (or may not) be good politics, but it's very bad economics. As I've argued elsewhere, failure to extend UI benefits — and fiscal assistance to the states too — will make the short-term deficit worse, not better. If the Republicans in Congress don't know this, they certainly should because a lot of economists have told them.

Besides, as Chad Stone, chief economist at the Center on Budget and Policy Priorities, says, we shouldn't worry about the short-term deficit. In fact, we should be doing deficit spending now to help the economy recovery. Then we can tackle the long-term, structural deficit — the one we should really be concerned about.

Nobel Prize-winning economist Paul Krugman says the same.

What are the Republicans talking about when they say Congress should use stimulus funds as a pay-for?

The stimulus funds the Republicans are referring to are funds Congress appropriated as part of the 2009 economic recovery act (pdf). Large amounts of these funds have already been spent — on extended UI benefits, among other things.

But there are still unspent funds that were put into the budgets of various federal agencies. Some are funds for infrastructure and energy projects. Projects like these take awhile to get to the "shovel-ready" stage. Other types of projects, e.g., training programs, also take time to develop. That's why the funds are still in the federal treasury.

Sen. Scott Brown (R-MA) views the unspent stimulus dollars as a "slush fund" that's just sitting around. On Wednesday, he introduced a bill (S. 3551) that would use these job-creating funds, plus unnamed cuts in "wasteful and unnecessary spending" as an offset for the UI benefits extension and some other parts of the jobs/tax bill.

More specifically, the bill would wipe out all remaining balances agencies have for stimulus spending, except (guess what?) military construction and veterans affairs. It would also, like the jobs/tax bill that just died in the Senate, wipe out funds to sustain the boost in food stamp benefits past May 2014.

Why not reallocate the unused stimulus funds?

As the remaining funds go out, they'll generate more jobs. And those jobs will generate jobs because the people who get them will spend their earnings. As they buy goods and services, the businesses that provide them will have to hire more people. So will the companies that supply them. This is one of the reasons the funds are called "stimulus."

Now, it's true that UI benefits also indirectly preserve and create jobs. But using stimulus funds to offset the costs of extending them is a case of robbing Peter to pay Paul. Give jobless people temporary unemployment benefits averaging around $300 a week. Take away their opportunities to earn more by stalling the economic recovery.

What can we do now?

Just before it broke for the July 4th recess, the House passed a standalone extension of unemployment benefits (H.R. 5618). Like the version in the blocked Senate jobs/tax bill, it would continue the extra weeks of UI benefits through November, but without the additional $25 that have been in UI checks since the economic recovery act was passed. This is less than ideal, but probably as good as it's going to get.

As always, victory will hinge on getting 60 votes in the Senate so that a substantive vote on the bill can be taken. A similar measure got very close just before Senators went home for the Glorious Fourth. But, as the old saying goes, it aint' over till the fat lady sings.

So those of you who are represented by Republican Senators and/or Senator Ben Nelson (D-NE), who voted with them, can use the recess time to visit your their home offices or go to events they'll be attending. Keep your eye out for local demonstrations too.

Take friends and relatives along. Tell your stories and the stories of people you know — just as some of you have been doing on this blog. Ask your Senators how they expect unemployed workers and their families to survive when there are nearly five times as many people actively looking for work as jobs available (pdf).

And let's all keep the pressure on by urging the Senate to pass the House bill as-is and as soon as possible.

Photo credit: takomabibelot